1. Tax Deferral Strategies

2. Catalin Zetu, PFP, MBA Professional Financial Planner

3. Strength ● Stability ● Performance
Investors Group Inc. (IGM Financial)
Over 80 years strong
Over 100 wealth management centres across Canada
4400+ Professional Consultants
Serving 1 in 18 Canadians
Publicly traded (TSX:IGM) 3

4. The Investors Group Advantage… Of Industry Leadership
Source – IFIC

5. Agenda Tax Deferral RRSP vs. Individual Pension Plan
Tax Efficient Investments
Retirement Compensation Agreements
Insured Retirement Plans
Estate Bonds
Health And Welfare Trusts

6. Sample Corporate Share Structure
CORPORATION
FAMILY TRUST
BENEFICIARY
(Owner)
(Spouse)
(Child 1)
(Child 2)
(Child 3)
Trustee = Owner

7. Paying for Children’s Education
$25,000 Tuition + $15,000 Expenses
Shareholder
Student
Student
Professional Jr.
Dividend
56,400
40,000
Share. Loan
40,900
(40,900)
Taxes
(17,513)
(930)
(6,940)
Credits Used
1,113
930
6,040
Net Cash
40,000
40,000
40,000
18,980
Tax Refund
Assumptions: Shareholder & Prof. Jr., MTR = 46.41%; No other income for Student

8. Retirement Income Streams0%
IRP
OAS
100%
TFSA
CPP
N-R
RRSP
IPP
0% - 100%
100%

9. Retirement Planning – The IPP
Individual Pension Plan
“Super-RRSP”
Additional pre-tax funds out of corporation in a tax-deferred manner
Based on benefit formula
Who does it best suited for?
Who’s involved?

10. Individual Pension Plan (IPP)
Individual Pension Plan: Case Study
Assumptions
50 year old executive / shareholder
Active in business since 1990
RRSP value ~ $325,000
Expected 2010 T4 earnings ~ $125,000

11. (Allowable Contributions)
RRSP vs. IPP
(Allowable Contributions)
Year
Age
IPP
Contribution ($)
RRSP
IPP Advantage ($)
2010 50
198,970*
22,000
176,970
2015 55
39,879
27,254
12,625
2020 60
57,251
35,620
21,631
2025 65
82,191
46,554
35,637
Incorporated since 1990
*Includes past service contribution of $171,192 from corporation.

12. (Plan Balance at Year End)
RRSP vs. IPP
(Plan Balance at Year End)
Year
Age
IPP
Balance ($)
RRSP
Advantage ($)
2010 50
546,709*
352,336
194,373
2015 55
995,223
652,570
342,653
2020 60
1,729,182
1,128,641
600,541
2025 65
2,912,165
1,870,978
1,041,187
Advantage – whole family can be in structure – no deemed disposition when parents die
* Includes RRSP transfer-in of $307,500

13. RRSP vs. IPP – Estimated Annual Payout
Year
Age
IPP
Payout ($)
RRSP
IPP Advantage ($)
2010 50
29,761
19,180
10,581
2015 55
57,594
37,764
19,830
2020 60
108,006
70,496
37,510
2025 65
200,475
128,799
71,676

14. 46.4% 46.7% Tax Quiz Top personal marginal tax rate
Corporate tax rate on passive income
46.4%
46.7%
$126,264 – 46.41% (2009)

15. Corporate Class Structure
Retirement Income Tax Planning
Corporate Class Structure
Interest
Dividends
Capital Gains
income
income
income
Fully Taxable
Tax-preferred
50% taxable
Every year
Every Year
When You Choose
income
50% taxable
When You Choose 15

16. Corporate Class Structure
Growing Non-Registered Investments Tax Preferred
Corporate Class Structure
Moderate Portfolio
Initial Investment $400,000
$400,000
Moderate Portfolio after 10 years
$400,000 now worth $642,833
$712,236
Moderate Portfolio after 20 years
$657,516 now worth $1,033,087
$937,900 after tax
$1,268,200
$1,063,525 net after tax
13% More
Tax rate = 46.7%
Rate of return on regular portfolio: 1.5% interest % dividends + 1.0% capitals gains + 3.0% deferred growth = 6.0%
Rate of return on corporate class portfolio: 0.25% capital gains % deferred growth = 6.0% 16

17. Retirement Compensation Agreements: Features
Defined under section 248(1) of the Income Tax Act
Contributions are deductible
Business owner or key employee
Upon Sale of Business
Bullet-proof creditor protection
Avoids payroll taxes
Benefits taxable when received: tax deferral

18. RCA Structure Contributions 50%
50% of Income earned in IA remitted to RTA annually
Click once……the entire images comes up on it’s own.
50% of withdrawals remitted to IA annually
Withdrawals at retirement.
Member taxed

19. Funding the RCA: Tax Deferred
Investment Grade Insurance
Split Dollar Arrangement
Corporate Class Investments
Little or no income distributions

20. Secret 7 The Best Tax Shelter!! Corporate Insured Retirement Plan
Good candidates? 45 year-old professional, Need for life insurance, Looking for tax-efficient retirement vehicle
Features
Guaranteed cash value and death benefit
Annual policy dividends are vested immediately
Accumulated cash reserve will not be subject to investment market risk
Option 1
Traditional investment portfolio earning 6%
Invest $30,000 per year for 20 years
Investment subject to tax
Option 2
IRP – Investment Grade Insurance
Contribute $30,000 per year for 20 years
$1,000,000 death benefit

21. IRP: Participating Policy
CCPC
LIFE INSURANCE

22. Corporate Insured Retirement Plan
Brian: 45 year old business owner
Needs additional life insurance & retirement income
Option 1
Traditional investment portfolio earning 6%
Invest $30,000 per year for 20 years
Investment subject to tax
Option 2
IRP – Investment Grade Insurance
Contribute $30,000 per year for 20 years
$1,000,000 death benefit

23. Corporate IRP – Participating Policy
Traditional Investment
Corporate IRP
Annual Contribution
Portfolio Mix (FI/Equity)
Rate of Return
Annual Income (Age 65 to 85)
Investment Values at age 65
Guaranteed Cash Value at age 65
Death Benefit at age 85
$30,000
$30,000
40/60
80/20 6%
7.4%
$60,000
$60,000
Based on current dividend scenario
MTR = 46.41%
The IRP achieves many financial goals
Investment Planning - Guaranteed cash value, No risk investment
Tax Planning - Cash dividends grow tax free, Use corporate dollar to pay premiums
Retirement Planning - Tax-free access to cash reserve
Risk Management - Family income protection for premature death
Estate Planning - Tax-free payout of death benefit to preserve your estate
$774,500
$1,029,500
N/A
$629,000
$129,000
$1,597,000

24. Corporate Estate Bond 65-year old couple
Goal: Leave legacy to children / grandchildren
Looking for minimal risk
Option 1
Traditional conservative investments earning 5%
Invest $20,000 per year for 10 years
Investment subject to tax, probate costs
Option 2
Estate Bond – Investment Grade Insurance
Contribute $20,000 per year for 10 years
$500,000 death benefit (on 2nd death)

25. Corporate Estate Bond Jack & Jill: 65 year old couple
Wish to leave an estate for children
Option 1
Traditional conservative investments earning 5%
Invest $20,000 per year for 10 years
Investment subject to tax, probate costs
Option 2
Estate Bond – Investment Grade Insurance
Contribute $20,000 per year for 10 years
$500,000 death benefit (on 2nd death)

26. Estate Bond vs. Investments After-Tax Estate Comparison

27. After-Tax Rate of Return
Corporate Estate Bond
Age
Death Benefit
$500K plus CSV
After-Tax Rate of Return 85
$685,000
8.1% 90
$710,000
6.2% 95
$730,000 5%

28. HAWP - Features
Enable all uninsured medical, dental, and vision expenses to be paid out of pre-tax expenses, as incurred
Fund group critical illness and long term care insurance.

29. HAWP - Benefits Employer pays with pre-tax income
Fully tax deductible to corporation
Employee will not include taxable benefits
Very flexible choice of expenses that can be covered – medical, vision, & dental procedures

30. Employee submits claim form & receipts
HAWP - Payments
Employer Receives claim form & issues a cheque for 100% of the expense to the trustee (HAWP)
Employee submits claim form & receipts
Trustee receives the claim and receipts & issues a cheque for 100% of the expense from the HAWP to the employee

31. What We Have Covered: Tax Deferral RRSP vs. Individual Pension Plan
Tax Efficient Investments
Retirement Compensation Agreements
Insured Retirement Plans
Estate Bonds
Health And Welfare Trusts

32. The Next Step… We have set aside complimentary,
one-hour no obligation timeslots for consultations.
Financial success is a matter of choice, not chance. We like people making informed choices, but not taking chances. Contrary to the old cliché what you don’t know CAN hurt you.
Now it’s important for you to know, that we’re not trying to be all things to all people. We’re not trying to see how big we can make our practice it’s how small we can keep it. We know our capacity. If we extend beyond that capacity it’ll dilute the level of service we provide to our clients and that’ll never do. We are all things… to some people. 32